Crocodile Dundee swept up in tax net

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Home grown ... Hogan and John Cornell are thought to have received
20 per cent of the profits from Crocodile Dundee.Photo: Jon Reid

One of Australia's most famous entertainers, Paul Hogan, has
been caught up in the Australian Crime Commission's special
investigation into the use of offshore tax havens.

Millions of dollars in royalty payments from Hogan's
Crocodile Dundee films were channelled from Hollywood's 20th
Century Fox, owned by News Corporation, to complex offshore tax
structures in Chile and the Netherlands Antilles - a Caribbean tax
haven.

The Herald understands that the Crime Commission wants to
question Hogan relating to any knowledge he has of tax avoidance
schemes. They are also interested in the former Sydney Harbour
Bridge rigger's bank statements, receipts, credit cards, debit
cards and computer records.

According to a source close to Hogan, it was more likely that
the Crime Commission was examining possible criminal activities of
some of Hogan's then tax advisers rather than Hogan himself.

Speaking on behalf of Hogan, the source stressed that his
involvement in tax havens had been organised by his then US
lawyers, and that any failure to pay tax was the result of
ignorance rather than dishonesty.

The source said Hogan was "put into" offshore structures by
top-line Los Angeles lawyers and advisers in about 1986, and those
advisers may not have understood Australia's complex and changing
tax laws.

The Crime Commission is interested in the connection between
Hogan and brothers Philip and Richard Egglishaw, of the Swiss-based
firm of tax haven specialists, Strachans. The Herald has
previously revealed that Strachans is the central focus of
Australia's biggest tax investigation, Operation Wickenby.

The Crime Commission is examining why a large proportion of
Hogan royalties ended up offshore in tax havens administered by
Strachans, which recently moved its headquarters from Jersey, in
the Channel Islands, to Geneva, Switzerland. Those offshore
entities included secret trusts which did not disclose the ultimate
controller or beneficiary.

When required, funds were drawn down by Hogan and family members
from automatic teller machines in Australia, using credit or debit
cards issued by tax haven banks.

The tax haven affairs of Strachans and some of their Australian
clients became known to the Crime Commission in November 2003, when
agents from the commission entered Philip Egglishaw's hotel suite
at Sydney's Sheraton on the Park and seized three key promotional
documents featuring the firm's distinctive double "S" logo and
pinstripe backdrop.

Documents, seen by the Herald, emphasise secrecy and
promote the use of "blind" and "mobile" trusts aimed at minimising
tax, or avoiding it altogether. They strongly promote the use of
tailored offshore "employment companies" for film stars.

David Rydon, a Sydney litigation lawyer acting on behalf of
Hogan, said he could not confirm or deny the tax investigations
because of secrecy laws governing crime commission investigations,
"which may or may not apply" to his clients.

"As I emphasised at our meeting, because of the operation of the
ACC Act, I could not confirm or deny that any person for whom my
firm acts had received any formal notice or otherwise from the ACC
or was the subject of any investigation by the ACC," Mr Rydon wrote
in a subsequent email.

In 1985 Hogan co-wrote the script for Crocodile Dundee,
starring himself, while his business partner John "Strop" Cornell
raised $9 million to make the films through their joint production
company, Rimfire Films.

The film went on to take $US350 million at the box office and
remains the most successful Australian movie of all time.

Hogan and Cornell are thought to have received 20 per cent of
the profits from Crocodile Dundee and a larger profit share
from the sequel in 1988 - which earned more than $US200 million at
the box office. Earnings went 70 per cent to Hogan and 30 per cent
to Cornell.

The Australian financial backers for Crocodile Dundee
received another 20 per cent of profits, while the Hollywood
distributor and exhibitor took the remaining 60 per cent.

The Rimfire Films prospectus, used to raise funds for the first
Dundee movie, says companies controlled by Hogan and Cornell were
to split profits 50-50 with the film's Australian financial
backers, who had invested to qualify for Part 10BA tax
concessions.

By July 1988 those investors had received an 860 per cent return
on their original $9 million investment, according to a source who
distributed the profits. The returns have since expanded to well
over 1000 per cent, and the annual royalty cheques did not dip
below $1 million until 1999.

Since then, all profits were required to flow to Hogan's family
company, PH Enterprises, and Cornell's family company, Cornell
Holdings, according to the Rimfire Films prospectus.

Fox was granted a licence from Paramount Pictures to distribute
Crocodile Dundee outside the US.

Hogan and Cornell also received acting, script writing and
production fees.

The combined earnings of the pair from the Crocodile
Dundee films are thought to be about $150 million. The third
film, Crocodile Dundee in Los Angeles, was released in 2001
but barely broke even.

The films also earned hundreds of millions of dollars from
licensing the rights to television, video, DVD and merchandise.